McDonald's Proves To Be A Recession-Proof Business

Fast Food Nation and Super Size Me could not kill it. A culture of Whole Foods and health-conscious chic couldn't kill it. The New York Times reports how McDonald's has been perhaps surprisingly resilient even in today's economy. While almost every other large corporation has been taking a hit in earnings, but McDonald's just won't stop growing. The only two companies in the Dow Jones industrial average who had any growth in share price in 2008 were the golden arches and another heavily vilified company, Wal-Mart.

I first thought when I read this, "Well, of course McDonald's is going to do well--fast food is a booming industry during a recession." Consumers will cut back on high-end dining, and McDonald's is the beneficiary. Small restaurants tend to lose out. But if that were the only explanation, you would see other fast-food places doing just as well. That has not panned out. The parent companies of Wendy's and Burger King, for example, have seen their share prices decline or pretty much stay the same over the past year.

So what are the ingredients in this secret sauce? Part of it was that McDonald's to some degree has been "progressive" and embraced healthier food options. But nobody is ever going to choose McDonald's over another restaurant to help with a diet. It seems like the main reasons for success are more traditional: doing lots of market research, and following through on what the customer wants--added late-night hours, a focus on drink options, more chicken instead of just burgers.

What's the lesson for entrepreneurs from the success of this megacorporation? Bad press and a somewhat nefarious public reputation don't have to be the deathknell of your efforts. For evidence that this works on a small-time level, check out a recent CBS News report on Arizona's Heart Attack Grill (HT The Agitator), which makes McDonald's look like a vegan restaurant. Its owner wholeheartedly embraced the criticisms of fast food, and actually played into them--customers are checked in as "patients" when they walk into the restaurant by nurse waitresses. And forget the Big Mac--here you can get Quadruple Bypass Burgers that weigh in at 8,000 calories each.